Nintendo, Sony--this one's on us! Love, Microsoft

The honest truth is that when I wrote my last entry, suggesting that Microsoft soon drop the price of their Xbox 360, I believed the Xbox 360 Elite rumors were nothing more than wishful thinking. That's wishful thinking by selfish Internet dweebs with no appreciation for the market and Microsoft's financial success, the sort of clueless folks that threw a fit when Devil May Cry 4 got multi-platform'd.

Microsoft to Sony: So this is what it's like to be stupid expensive.

With so much backlash against the PlayStation 3 and its exorbitant price--backlash that manifested in February as abysmal monthly sales for the system--what sense does it make for Microsoft to increase the price of the 360 to add a pair of features that so few care about? The answer is "none," I assumed before writing that now is the right time for Microsoft to kick Sony in the groin with an Xbox 360 price drop. But they did the opposite.

Microsoft just upped the price of the Xbox 360. Forget that the Premium and Core packs are both still around (and both still at their unchanged price points). By releasing the Elite pack, Microsoft just made their flagship Premium system dated. The Xbox 360 Premium pack has been, by far, the better selling of Microsoft's two current SKUs, largely because it's perceived as the "better" unit. Consumers don't want an inferior product, a notion also supported by sales of the PlayStation 3. The vast majority of PS3 sales are 60GB pack purchases.

Confused about which you should get? Imagine Mom's dilemma.

As well as driving up the perceived cost of the system, Microsoft is further confusing the market. Both Microsoft and Sony's double SKUs have little (if any) success in diffusing the sting of the platforms' prices, and instead only make consumer decisions fuzzy. If you need proof that adding a third SKU to the Xbox 360 lineup is confusing, just read the words of Albert Penello, Director of Global Platform Marketing for Microsoft. "We now have three SKUs and we predict the primary seller will continue to be the Pro system." The Pro system? Microsoft's own marketing director can't get the names straight.

Let's assume that this is all worst case scenario, that there's merely a chance that consumers will perceive the system's price to increase and it's only a gamble that this might add confusion to the market. What does the gamble achieve? Microsoft adds an HDMI port and a bigger hard drive to appease--what?--point-five percent of the market?

The Elite is wrong for Microsoft. The 360 has already run into trouble reaching out to the mainstream market needed to make the system a real success. The Xbox 360 Elite pack does nothing to alleviate the problem, and instead probably worsens it. Maybe introducing the Elite sets up Microsoft to nix the 360 Core pack, drop the Premium to $299 and continue to sell a $399 console, fleecing the market willing to pay that much money. I think that's the best case scenario, much less likely than the worst.